529? Or something else?

[Anonymous]

How are you going about saving money for your children's college education? 529? Is there any other way that you have saved money without being locked into a 529?
Many thanks!

[Anonymous]

Roth. You can save in a Roth and then pull out the principle at any time without paying any fee or penalty.

We do the 529 for the tax benefit-- my DH and I each put $4000 a year into a DC 529 in order to get the $8000 tax deduction. Beyond that we would do a Roth. Haven't been able to afford it yet but we will in the future. Or another 529 with super low fees (Vanguard for example). You can have multiple 529s if you want.

[Anonymous]

Is the tax benefit from a 529 significant enough?

[Anonymous]

Yes, off state tax. It's worth it. Plus after several years you can switch the funds to a different plan (other threads explain this).

[Anonymous]

Also remember family members can get a 529 for your kid and htey get the tax benefit. So good way for grandparents to give money to grandchildren for college, wehre they also get some benefit.

[Anonymous]

Now that we are paying for college I see that the real benefit of the 529 is that the money we take out to pay for college, including the capital gains, is not taxed. The state tax deductions at the front end were pretty minor in retrospect.

[Anonymous]

Anonymous wrote:Is the tax benefit from a 529 significant enough?

Front end tax benefit is minimal. It only applies to state tax and it is capped - I think VA is $4,000 so you only get benefit on the first $4K and on the state tax rate.


The true benefit is that from a fed tax standpoint, you put in post tax dollars and you don't pay any tax later on the gains.

[Anonymous]

Keep in mind though that if your income can qualify you for any kind of need-based financial aid - 529 plans and such will play against you to reduce the amount of fin aid.